Aereo Beats Broadcasters in Big Appellate Ruling

Barry Diller

Chet Kanojia raised $20.5 million in seed investment, including millions from Barry Diller, who said that when he first heard Kanojia pitch Aereo, his team "spent a lot of time and a good amount of money trying to find, legally and technically, what was wrong with it."

The Second Circuit Court of Appeals has handed TV broadcasters a devastating blow by determining that a federal judge properly declined to issue an injunction that would have shut down Aereo, the service that digitally transmits over-the-air TV signals to private customers.

According to Monday's ruling:

"We conclude that Aereo’s transmissions of unique copies of broadcast television programs created at its users’ requests and transmitted while the programs are still airing on broadcast television are not 'public performances' of the Plaintiffs’ copyrighted works under Cablevision. As such, Plaintiffs have not demonstrated that they are likely to prevail on the merits on this claim in their copyright infringement action. Nor have they demonstrated serious questions as to the merits and a balance of hardships that tips decidedly in their favor. We therefore affirm the order of the district court denying the Plaintiffs’ motion."

Here's the full ruling.

Aereo was launched in the New York market in March, 2012 after gathering  $20.5 million in financial backing from Barry Diller and other investors.

Although other services that attempted to stream television online have been deemed a violation of copyright holders' public performance rights, Aereo attempted a new system based upon thousands of tiny antennas, which would capture over-the-air TV signals, then transmitting the playbacks individually to each of its customers for a subscription fee.

STORY: Aereo Denied First Attempt to Stop 'Aero'

The TV broadcasters contended this was illegal and that it would cause irreparable harm. For instance, during hearings last year, an attorney for one of the networks said that if Aereo wasn't shut down, "events like the Super Bowl will not be on TV anymore."

Nevertheless, U.S. District Judge Alison Nathan declined the requested injunction based upon a 2008 decision concerning Cablevision's remote-storage DVR that held that because "each RS-DVR playback transmission is made to a single subscriber using a single unique copy produced by that subscriber ... such transmissions are not performances 'to the public.'"

On Monday, the Second Circuit reviewed that decision.

Circuit judge Christopher Droney wrote for the majority and says that Aereo's system has resemblance to the one that passed muster in the Cablevision case. In particular, that the system creates unique copies for each customer and that the transmission of the copy is generated from that unique copy and no one else can view it.

"The same two features are present in Aereo’s system," writes Judge Droney. "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. 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. Thus, just as in Cablevision, the potential audience of each Aereo transmission is the single user who requested that a program be recorded."

The Second Circuit dismisses broadcasters' arguments why Aereo is distinguishable from Cablevision. For one thing, broadcasters argued that unlike Cablevision, Aereo doesn't license the underlying programming.

The argument is called "irrelevant."

Judge Droney adds, "Cablevision did not hold that Cablevision’s RS-DVR transmissions were licensed public performances; rather it held they were not public performances."

The Second Circuit also rejects the broadcasters' arguments about the aggregation of discreet transmissions into a public performance as well as the urging by broadcasters to see Aereo as a cable television provider rather than a modified VCR/DVR.

"We see no support in Cablevision or in this Court’s subsequent decisions for the Plaintiffs’ argument that Cablevision’s interpretation of the Transmit Clause is confined to technologies similar to the VCR," says the majority opinion.

Judge Droney admits that at the time of copyright amendments in 1976, "distinguishing between public and private transmissions was simpler than today."

He adds: 

"New devices such as RS-DVRs and Slingboxes complicate our analysis, as the transmissions generated by these devices can be analogized to the paradigmatic example of a 'private' transmission: that from a personal roof-top antenna to a television set in a living room. As much as Aereo’s service may resemble a cable system, it also generates transmissions that closely resemble the private transmissions from these devices. Thus unanticipated technological developments have created tension between Congress’s view that retransmissions of network programs by cable television systems should be deemed public performances and its intent that some transmissions be classified as private. Although Aereo may in some respects resemble a cable television system, we cannot disregard the contrary concerns expressed by Congress in drafting the 1976 Copyright Act. And we certainly cannot disregard the express language Congress selected in doing so." 

The ruling wasn't unanimous.

Second Circuit judge Denny Chin rejects the assessment above and issues a warning. "Today's decision does not merely deny the broadcasters a licensing fee for Aereo's activity; it provides a blueprint for others to avoid the Copyright Act's licensing regime altogether," he writes.

An appeal to the U.S. Supreme Court seems likely and might obtain a high court review if broadcasters are able to succeed in affirming a recent injunction on Alki David's AereoKiller in the Ninth Circuit.

"Today’s decision is a loss for the entire creative community," said a joint statement issued by the broadcaster-appellants issued a joint statement about today's ruling. "The court has ruled that it is ok to steal copyrighted material and retransmit it without compensation.  While we are disappointed with this decision, we have and are considering our options to protect our programming.  In the meantime, we plan to move forward towards a trial on the merits of the case, and on claims that were not impacted by this appeal.  We remain confident that we will ultimately prevail." 

Aereo CEO Chet Kanojia expressed satisfaction.

He said, “We may be a small start-up, but we’ve always believed in standing up and fighting for our consumers.  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.”

Said Diller in a statement:  "We always thought our Aereo platform was permissible and I’m glad the court has denied the injunction – now, we’ll build out the rest of the US."

E-mail:; Twitter: @eriqgardner