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“As a non-profit, Locast was designed from the very beginning to operate in accordance with the strict letter of the law, but in response to the court’s recent rulings, with which we respectfully disagree, we are hereby suspending operations, effective immediately,” the company wrote in an email message to users Thursday.
Locast streamed local TV stations to users who did have access to them through a cable or satellite TV service, or who did not use a digital antenna. The service was available in some 36 local markets, which reached more than half of the U.S. population.
The service bore a striking similarity to Aereo, which also sought to stream local TV stations to users, but with a twist: Locast presented itself as a nonprofit that offered its service for free.
Under § 111(a)(5) of the Copyright Act, nonprofit organizations are allowed to operate secondary transmission services, and Locast used that as the crux of its legal argument. However, Locast also allowed users to donate $5 per month to help keep the service running, and interrupted programming every 15 minutes to run ads asking for donations. Those interruptive ads formed the basis of the broadcasters’ argument.
On Tuesday, a federal judge in New York looked at the way Locast raised funds — soliciting donations from users and interrupting service every 15 minutes for non-paying ones — and where the money went. The judge ruled that fundraising could only be used to defray costs of operating the service, not of expanding it into new markets. Locast, which until today had expanded into 36 markets serving 55 percent of the U.S. population, had exceeded an exemption.
While technically, the judge hadn’t yet ruled that Locast had violated copyright, only that Locast couldn’t raise its primary affirmative defense (the service had other defenses), the parties had made an unusual agreement at the start of litigation. In return for not seeking hefty financial damages, broadcasters got Locast to agree to an injunction in the event a federal judge rejected its key defense. Given the court’s ruling earlier this week, the broadcasters quickly sought to hold Locast to that promise, and now Locast has bowed to the inevitable.
“Since portions of its user payments fund Locast’s expansion, its charges exceed those ‘necessary to defray the actual and reasonable costs of maintaining and operating the secondary transmission service,’ which is the only exemption granted in Section 111 (a) (5),” wrote U.S. District Court Judge Louis Stanton in his order Tuesday.
Locast launched in 2018, and was the brainchild of attorney David Goodfriend. The case will continue, but in time for the NFL season and MLB playoffs, where millions of cord-cutters may have looked to Locast for telecasts of local games, the service will now be suspended.
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