Justices rule for broadcasters in fight with Aereo

Aereo founder Chet Kanojia called the Supreme Court's decision a "massive setback for the American consumer." He added in a statement: "We are disappointed in the outcome, but our work is not done."
Aereo founder Chet Kanojia called the Supreme Court's decision a "massive setback for the American consumer." He added in a statement: "We are disappointed in the outcome, but our work is not done." (ALEX WONG / Getty Images)
Posted: June 27, 2014

The U.S. Supreme Court dealt a harsh and perhaps fatal blow to online TV streamer Aereo Inc. on Wednesday, deciding in a 6-3 vote that the New York company violated the nation's copyright laws by grabbing local broadcast-TV signals out of the air and sending them over the Internet to subscribers for about $8 a month.

The broadcasters contended that Aereo was stealing TV signals for a profit and threatened to move TV shows and news off the public airwaves and onto pay TV if Aereo prevailed before the nation's highest court.

At stake financially was billions of dollars in retransmission fees that cable-TV and satellite-TV companies pay to the TV broadcasters for their content - fees hidden in the pay-TV bills of 100 million consumers.

With Aereo's Internet-based model, those fees could begin to evaporate. TV officials called the decision a "big day," as Aereo or companies like it now will have to negotiate distribution agreements with them.

"For broadcasters, this is a huge relief and lifts a cloud of uncertainty," Laura Martin, entertainment and Internet analyst with Needham & Co. L.L.C., said Wednesday. She said the consensus was that the Supreme Court's decision "puts Aereo out of business." Broadcast company stocks soared when the Supreme Court posted the opinion in midmorning.

Aereo's founder, Chet Kanojia, called the decision a "massive setback for the American consumer." He added in a statement: "We are disappointed in the outcome, but our work is not done."

Paul Clement, the lawyer for the TV broadcasters who brought the case, including Comcast Corp.-owned NBC, called the decision "a victory for consumers. The court has sent a clear message that it will uphold the letter and spirit of the law just as Congress intended."

Experts were divided Wednesday on whether the court's majority opinion was written narrowly enough so that it would not have a chilling effect on new cloud or Internet technologies.

"This is a big loss for Aereo and any upstart that wants to provide innovative services to challenge the broadcasters and cable companies," said Michael Carrier, a professor at Rutgers School of Law-Camden and an expert on copyright and innovation law. "If you are Aereo this does not feel like a narrow opinion."

David Post, a Temple University law professor who was part of a group that filed a brief supporting Aereo, said the decision seemed carefully crafted to apply only to TV broadcast signals and should not affect other Internet services.

"Everything continues just as it was yesterday," Post said.

Justice Stephen G. Breyer wrote the majority opinion, saying that the Aereo service was, in essence, cable-TV and that it had to comply with the same laws as cable companies.

Justices John G. Roberts, Anthony M. Kennedy, Ruth Bader Ginsburg, Sonia Sotomayor, and Elena Kagan concurred in the opinion.

A conservative bloc of Justices Antonin Scalia, Clarence Thomas, and Samuel A. Alito Jr. dissented. Scalia wrote that the court's majority opinion was based on a "looks-like-cable-TV" standard that will lead to future legal challenges.

Experts handicapped the case in the broadcasters' favor because it seemed that Aereo's technology has been designed to skirt copyright laws.

"The Supreme Court said no," said Andrew Goldstein, an intellectual property lawyer and a partner at the Chicago firm Freeborn & Peters. "It's copyright infringement. . . . I don't think it's a big blow to the cloud computing industry. The only lesson that can be taken from this for new technology companies is that if they build their technology on a legal loophole, it could be a house of cards that tumbles down if a court rules against them."

Aereo's Kanojia said the company's technology complied with federal communications laws and would force cable-TV prices down by offering an alternative to high-priced cable-TV bundles.

Aereo equated its service to leasing an antenna on an antenna farm and DVR-like equipment so subscribers could make digital copies of broadcast-TV shows and then send the shows to themselves over the Internet.

Based in New York, Aereo launched its service in about a dozen markets, though not Philadelphia. Aereo was backed by longtime TV and Internet executive Barry Diller. He has said there was no "Plan B" if Aereo lost at the Supreme Court.


bfernandez@phillynews.com

215-854-5897

@bobfernandez1

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