Appeals court upholds legality of Aereo’s “tiny antennas” scheme | Ars Technica

A federal appeals court has handed a big setback to broadcasters trying to stop Aereo, a startup that streams New York-area television content over the Internet. Broadcasters such as Fox and Univision argued that transmitting TV content without permission was copyright infringement. But Aereo countered that its service was analogous to a television and DVR that happened to have a really long cable between the antenna and the screen. On Monday, the United States Court of Appeals for the Second Circuit agreed.

Aereo's technology was designed from the ground up to take advantage of a landmark 2008 ruling holding that a "remote" DVR product offered by Cablevision was consistent with copyright law. Key to that ruling was Cablevision's decision to create a separate copy of recorded TV programs for each user. While creating thousands of redundant copies makes little sense from a technical perspective, it turned out to be crucial from a legal point of view. Because each copy was viewed by only one household, the court ruled that Cablevision was not engaged in a "public performance" of copyrighted works.

Aereo's founders realized that the Cablevision ruling offered a blueprint for building a TV rebroadcasting service that wouldn't require the permission of broadcasters. In Aereo's server rooms are row after row of tiny antennas mounted on circuit boards. When a user wants to view or record a television program, Aereo assigns him an antenna exclusively for his own use. And like Cablevision, when 1000 users record the same program, Aereo creates 1,000 redundant copies.

Broadcasters argued that the rows of tiny antennas were little more than a publicity stunt. They claimed that in reality, Aereo was merely re-transmitting their content without permission to thousands of users, an infringement of copyright's public performance right.

But on Monday, a panel of Second Circuit judges sided with Aereo in a two-to-one ruling. The broadcasters had sought a preliminary injunction shutting Aereo down for the duration of the trial. The trial court judge denied that request, and the Second Circuit judges upheld the judge's decision. In the process, they settled some of the key legal issues in Aereo's favor.

"When an Aereo customer elects to watch or record a program using either the 'Watch' or 'Record' features, Aereo’s system creates a unique copy of that program on a portion of a hard drive assigned only to that Aereo user," the majority ruled. "And when an Aereo user chooses to watch the recorded program, whether (nearly) live or days after the program has aired, the transmission sent by Aereo and received by that user is generated from that unique copy. No other Aereo user can ever receive a transmission from that copy."

And that, the court said, made Aereo's system directly analogous to Cablevision's, and by extension to a conventional DVR. The fact that the recording equipment and the customer's screen might be dozens or even thousands of miles apart was legally irrelevant. So long as each user had his or her own dedicated recording of the program, taken from the user's dedicated antenna, Aereo didn't need the broadcasters' permission to stream their content.

"It is beyond dispute that the transmission of a broadcast TV program received by an individual’s rooftop antenna to the TV in his living room is private," the court reasoned. "Plaintiffs have presented no reason why the result should be any different when that rooftop antenna is rented from Aereo and its signals transmitted over the Internet: it remains the case that only one person can receive that antenna’s transmissions."

In a strongly worded dissent, Judge Denny Chin described Aereo's technology as a "sham."

"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."

Judge Chin argued that Aereo was unlike Cablevision because the latter had a license to transmit the underlying content. "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," he wrote. But unlike Aereo, "those entities are doing it legally, pursuant to statutory or negotiated licenses, for a fee."

The majority's decision received the enthusiastic support of the advocacy group Public Knowledge. "Only in the world of copyright maximalists do people need to get special permission to watch over-the-air television with an antenna," PK's John Bergmayer said in an e-mailed statement. "Just because 'the Internet' is involved doesn't change this." He vowed to fight any effort to get Congress or the courts to reverse the decision.

"We may be a small startup, but we’ve always believed in standing up and fighting for our consumers," Aereo said by e-mail. "We are grateful for the court’s thoughtful analysis and decision and we look forward to continuing to build a successful business that puts consumers first."

All may not be lost for the broadcasters. This week's ruling means the broadcasters won't be able to shut down Aereo's service during the trial, but the company could still prevail in the underlying case. The broadcasters could also seek to have the ruling reviewed by a larger panel of Second Circuit judges.

If the ruling is upheld, it is likely to provide greater legal certainty for modern cloud media services. The Cablevision case is widely regarded as the legal foundation of cloud music services such as Google Music and Amazon Cloud Player. By elaborating on the reasoning of Cablevision, the new ruling will give future startups greater guidance about how to keep cloud media services within the law. Unfortunately, it may lead to a lot of wasted resources, as cloud providers store thousands of redundant copies of content to stay within the arbitrary bounds of the Cablevision ruling.