TV Broadcasters Attempt to Delay Aereo's Sale of Technology

Currently in bankruptcy, Aereo blasts the move as a calculated strategy to continue the bleeding

Just because (a) the U.S. Supreme Court gave TV broadcasters a big victory against Aereo, (b) a federal judge issued an injunction and (c) Aereo declared Chapter 11 bankruptcy, that doesn't mean the brawl is quite over. Far from it.

The latest development is an objection from CBS, NBC, Fox and other broadcasters to the way that Aereo plans on auctioning off its assets, including the technology that spurred a high-profile case over the performance of copyrighted programming on digital devices.

Rewind back to U.S. District Judge Alison Nathan's October decision to issue an injunction in the wake of what happened at the Supreme Court. Although broadcasters got much of what they wanted, the judge declined to rule on whether Aereo could still operate by delivering time-shifted programming.

Aereo then declared bankruptcy. There are some mixed signals about whether Aereo wishes to revive itself. On one hand, Aereo told the court this week that it "has made clear that it does not intend to reorganize or resume any operations," while on the other, it has told the bankruptcy court, "If the FCC elects to permit internet transmission of local linear broadcast channels, then the Debtor, assuming its continued viability, expects to be able to operate profitably within that framework."

Assuming that Aereo has long-range plans, it is dependent on finding new income to support operations in the short term. Regardless, creditors have to be paid. Hence, Aereo's planned sale of technology.

But the broadcasters' copyright litigation continues. Well, sort of, since a bankruptcy filing means an automatic stay in the copyright case. That's something that the broadcasters can't tolerate and so they are objecting to the sale.

"If Aereo elects to sell its assets, Aereo should not be allowed to use the automatic stay to evade resolution of the issue as to the lawfulness of time-delayed retransmissions," the broadcasters say in their objection filed on Tuesday. "If allowed to do so, Aereo would, in effect, be using the automatic stay as a device to obtain option value from a prospective purchaser willing to gamble on whether time-delayed retransmissions are infringing. The integrity of the sale process and of the bankruptcy court will only suffer if that occurs."

The broadcasters are telling the bankruptcy judge that the copyright issues need to be resolved first, and if the bankruptcy judge disagrees, they at least want to have some say on the terms and conditions of a sale to protect their own interests.

Aereo's lawyers are quite upset with this development, calling the broadcasters' motion a "strategy to bleed the Debtor of its remaining assets by continuing prepetition litigation," citing over $10 million spent fighting broadcasters to date.

"The Debtor is in bankruptcy because of the costs of the Copyright Litigation and is seeking to sell all of its assets in order to realize any value it can achieve in a fair and open process, for the benefit of all of its creditors and shareholders," says Aereo in court papers in response to the broadcasters. "Nothing in the Bidding Procedures Motion asks the Bankruptcy Court to provide relief from Broadcasters’ copyright claims."

Interestingly, Joseph Lipowski, chief technology officer at Aereo, has spelled out some alternative uses of Aereo's technology. In a declaration filed in bankruptcy court, he says that the Aereo system could be used with licensed content similar to the way it was used during Aereo's heyday for Bloomberg's business channel, that the Aereo system could be set up for live broadcasts of web cams of members of the public, that it could be used as a service similar to one provided by Netflix, or that it could be adapted to receive radio signals, weather signals and navigation signals. Or, he adds, it could be taken to foreign countries.

Update 12/20: The judge won't delay the auction.

Email: Eriq.Gardner@THR.com
Twitter: @eriqgardner

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