Judge Weighs 'Slippery' Legality of Barry Diller's Aereo in Day 2 of Key Hearing

Barry Diller Headshot - P 2012
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Barry Diller Headshot - P 2012

At the close of a two-day hearing to determine whether TV broadcasters will prevail on a motion for a preliminary injunction against Barry Diller's Aereo, a judge made no explicit indication of which way she is leaning. That said, one thing is clear from two days of testimony and arguments: If the Internet broadcaster survives, the revolution in how content is televised will be traced back to Aug. 4, 2008.

As the parties made closing arguments for and against an injunction, the potential impact of this case became apparent: It's huge. And to borrow the word used by New York Federal Court Judge Alison Nathan, what was being presented before her was "slippery."

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To understand why, consider that in 1984, in the famous Sony Betamax case at the U.S. Supreme Court, the VCR got legal blessing. Nearly a quarter-century later -- Aug. 4, 2008, to be exact -- remote-storage DVRs received a similar stamp of approval from the 2nd Circuit Court of Appeals in the so-called Cablevision decision. In that case, the appellate division ruled that "because each RS-DVR playback transmission is made to a single subscriber using a single unique copy produced by that subscriber, we conclude that such transmissions are not performances 'to the public,' and therefore do not infringe any exclusive right of public performance."

Now consider for a second what happens if someone builds a system where a DVR-type device captures an over-the-air TV signal and transmits it to a single subscriber over the Internet. What if the subscriber is able to "play back" the "copy" of the recording "contemporaneous" with the original live transmission?

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For all the talk that Aereo is a streaming company, that's what the company argues it is doing. "Aereo used the clarity of the Cablevision decision to create innovative technology," R. David Hosp, the company's lawyer, told Nathan on Thursday. Much of the broadcasters' time in arguments were taken up by distinguishing what Aereo was doing with the technology that passed muster in the Cablevision holding.

The plaintiffs argued that the Cablevision case was different because it had different facts and that Aereo's system shouldn't be considered mere time-shifting.

"The 2nd Circuit in Cablevision observed that playback was limited to the same set-top box that was assigned to received authorized transmission," argued Steven Fabrizio, one of the attorneys representing the broadcasters. "Aereo is designed to be disruptive. This is not just about watching at a later time. The Internet isn't just a different distribution channel; it's a different market."

Nathan, however, kept throwing a line from the Cablevision decision at the plaintiffs. The judge noted that this technology had been deemed legal: "Using a remote control, the customer can record programming by selecting a program in advance from an on-screen guide, or by pressing the record button while viewing a given program."

Is the difference between DVRs and Internet streaming, as we know it, ready to collapse? Is there really no boundary between what's considered "transmission" and what's considered "playback"? If so, by setting up many antennae and assigning them to single subscribers, Aereo might not be conducting a public performance, as the broadcasters allege.

But not so fast.

Nathan realized the implications of this quickly and threw it in the face of the lawyers representing Aereo.

"Are you saying that technology has beat the public performance issue?" she asked. "Isn't it always going to be easy if you want to transmit, you just make a copy?"

Hosp responded that public performance rights still pertained to such things as concerts, bars and the type of streaming that Netflix does but that it wouldn't apply to over-the-air transmissions that consumers have a right to access. "The technology is not only legal, but it is also good ... it puts value back into over-the-air which the public owns," he said.

The defense attorney also hit hard the point that "there is no question that a 'fixed copy' is made in the Aereo system" -- another reference to the Cablevision decision -- and that unlike past cases where a defendant was found to be violating content holders' public performance rights, Aereo's system wasn't concerning a transmission from a single source to multiple recipients but rather an individual source to an individual recipient, much like the way TV viewers used to put antennas on the top of their roofs to capture a signal and transmit it to their set-top box.

In deciding whether to issue an injunction, Nathan will have to consider the likelihood of success for the plaintiffs. She also will need to weigh whether broadcasters will suffer irreparable harm if an injunction isn't issued versus the harm that a young company like Aereo will suffer if ordered to stop its primary business activity.

Both sides have made the case on the harm issue. The broadcasters warn of the huge shakeup that will come if Aereo gets a pass. In turn, Aereo has tried to poke holes in the arguments.

Attorneys for the broadcasters didn't spend much time Thursday rehashing all of the harm they would face, but Bruce Keller, one of the other attorneys representing them, did make one blockbuster prediction.

"If not enjoined, there won't just be disruption in the general sense," he said. "Events like the Super Bowl will not be on TV anymore."

E-mail: eriq.gardner@thr.com

Twitter: @eriqgardner