Judge Is Skeptical About Aereo's New Bid for Survival

Aereo CEO Chet Kanojia - P 2013

 Aereo CEO Chet Kanojia - P 2013

On Wednesday, New York federal judge Alison Nathan considered a preliminary injunction against Aereo, the controversial tech service that upon launching in the spring of 2012, promised to pry open the delivery of television signals so that customers could access the major networks on digital devices.

At a hearing, attorneys for broadcasters and Aereo took turns arguing before a humbled judge who two years ago offered the prospect of revolution in the TV industry by denying an injunction on grounds that the relaying of individual copies of over-the-air TV signals constituted a private performance permissible under the Transmit Clause of the Copyright Act.

This time, after the U.S Supreme Court concluded otherwise, Judge Nathan was more skeptical of Aereo's arguments, even downright contemptuous at moments.

Broadcasters urged the judge to accept their view that the high court had sealed Aereo's fate by determining that Aereo looked like a cable operator and that its transmissions were a public performance. So emboldened were broadcasters by what Supreme Court Justice Stephen Breyer had to say in his opinion last June, attorney Richard Stone stated, "The Court was clear. Given that, the injunction should be broader than what was originally sought."

Read more Aereo Tells Judge It Can Beat Lawsuit Despite Supreme Court Ruling

By that, he meant that Judge Nathan should order that Aereo be stopped from "streaming, transmitting, retransmitting, or otherwise publicly performing any Copyrighted Programming over the Internet... or by means of any device or process throughout the United States of America."

Aereo came forward with its newfound argument that since the Supreme Court has likened it to a cable operator, that allows Aereo to make compulsory license payments under Section 111 of the Copyright Act, and therefore an injunction should be denied or limited. Attorney R. David Hosp gave his view that the high court had "changed the law, and as a result, opened up affirmative defenses that previously didn't exist," referring to Section 111. Since Aereo suspended its service in the wake of the Supreme Court ruling, the company has practically begged for mercy and a second life, entreating the U.S Copyright Office to accept its licensing payments, and most recently, asking the FCC to treat virtual MPVDs the same as the Comcasts and Cablevisions out there. (Here is a letter that was delivered by Aereo to the FCC last week.)

Judge Nathan wasn't too receptive to hearing much about this.

"Just as a matter of finality, how many bites at the apple does one get?" she asked Hosp.

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The problem for Aereo might be precedent from an appellate decision concerning ivi, a predecessor to Aereo, that was enjoined when judges didn't buy the Section 111 argument. The 2nd Circuit ruled in 2012 that "Congress has not codified a statutory provision for Internet retransmissions."

Hosp attempted to get around ivi by arguing that the case was "factually distinguishable" because ivi's service was directed to national and international audiences while Aereo has taken great pains to set up localized services.

"It's very much a question of local vs. national at least with respect to the Internet," said Hosp.

Judge Nathan quickly rebutted, "You have a different Internet?"

From the tenor of the hearing, it would be near shocking if the judge didn't issue an injunction. The main drama at this point pertains to the scope of injunction — whether it will be limited to live or near-simultaneous transmissions (as broadcasters originally demanded) or extend to much-delayed recordings.

Hosp argued that the Supreme Court hadn't overruled Cablevision — a Second Circuit ruling on the topic of remote DVR — with respect to the latter.

But the judge pushed Hosp to give her a concrete example at what a limited injunction would allow Aereo to do.

After some fumbling, Hosp offered that a "ten minute delay" of live transmission would be ok since the Supreme Court had expressly deferred on the question of the legality of time-shifting. Was ten minutes not enough of a delay? Shortly thereafter, Hosp proposed there would be little controversy between the parties if the delay was thirty minutes.

Read more Supreme Court Hands Broadcasters Huge Win in Aereo Battle

Attorneys for the broadcasters came prepared to rebut the Section 111 argument and even a defense based on the Digital Millennium Copyright Act — which got virtually no attention at Wednesday's hearing — but as the hearing proceeded, and the broadcasters were clearly in the advantageous position, their attorneys began to focus on the scope of the injunction and so they hit hard on the point, as Stone offered, that "there is no basis to limit the injunction to near-simultaneous transmissions" and that an important factor when considering Aereo is that unlike Cablevision, the copies being created don't emanate from any licensing relationship.

Bruce Keller, one of the three lawyers representing broadcasters, was one of the last to argue before Judge Nathan, and while he only spoke for two minutes, he brought up two points that could be impactful when the judge makes up her mind. First, he pointed to testimony by Aereo's expert that geo-location limitations can be bypassed so that someone, for example, in the Virgin Islands, can receive a transmission meant for New York. Second, he nodded to Aereo CEO Chet Kanojia's testimony two years ago that there really is no technological difference between live and non-live transmissions on Aereo's service — that it's always near-simultaneous when customers think they are watching something "live."

If Aereo has any hope for survival, it could be Judge Nathan's reticence about delivering a broader injunction than the one that broadcasters wanted and had taken up through the appellate courts. The judge might not want to deliver a ruling that could be interpreted as a knock against time-shifting, especially when there are other fights beckoning like the one over Dish's Hopper currently being adjudicated.

Nevertheless, it's not clear that a more limited injunction would be Aereo's saving grace. According to what was said today, Aereo was burning through cash at a clip of $1 million a month, and its biggest investor Barry Diller has signaled that he won't be infusing the company with more capital. In fact, attorneys for the broadcasters used this point to buttress an argument that if anything, the prospect of irreparable harm has increased since the Supreme Court's ruling since Aereo might not be able to pay any damages award.

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