The decision enables Aereo, now available only in New York, to expand to other TV markets, and it has said it could launch in Philadelphia this summer.
Comcast-owned NBC Studios, NBCUniversal Media and the Spanish-language Telemundo Network Group are among the companies suing Aereo. Broadcasters said on Monday they were disappointed in the court's decision and considering legal options, now that the case is headed for trial.
Aereo CEO Chet Kanojia said the court decision "validates that Aereo's technology falls squarely within the law and that's a great thing for consumers who want more choice and flexibility in how, when and where they watch television."
Aereo could be a threat to pay-TV companies such as Comcast Corp. by peeling away pay-TV subscribers to a new service that costs about $10 a month. Aereo also has the potential of depriving NBC, ABC, Fox, CBS and local TV stations of retransmission fees from pay-TV companies, if subscribers move to it.
The dissenting Judge Denny Chin called the Aereo's technology platform a "sham" and 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."
Aereo captures broadcast-TV signals on individual dime-sized antennas on an antenna farm, stores the programming for a few seconds, and then streams a copy of the content to subscribers on laptops, smart phones and tablets. Subscribers also can watch streamed Aereo content on a regular television via a Wi-Fi-enabled AppleTV or Roku devices.
While the broadcast companies say Aereo is retransmitting their content without paying for it, Aereo says it is creating a copy of the content and then delivering it to individual subscribers. Aereo says its technology conforms with federal laws and a 2008 court precedent involving Cablevision, which stores and transmits TV content from centralized equipment that acts as individual DVRs for subscribers.
Aereo intends to create antenna and server farms in other big TV markets. Analysts say Aereo would be a bigger threat to the $150-billion pay-TV industry if it could negotiate to carry cable channels, such as ESPN or USA, that would give it wider appeal.
Diller, the former Fox executive and chairman of IAC/InterActive Corp., is an investor in Aereo and sits on its board.
"Today's decision is a loss for the entire creative community. The court has ruled that it is OK to steal copyrighted material and retransmit it without compensation," Fox, PBS and others said.
"This case is still in its early stages and we are confident that when the record is fully developed the rights of content owners will be protected . . . " NBC and ABC said in a separate statement.
Contact Bob Fernandez at 215-854-5897 or email@example.com or follow on Twitter @bobfernandez1.