Barry Diller-Backed Aereo Faces Legal Fight with TV Broadcasters

3/7/12Follow @jpruth

Outraged by Long Island City-based Aereo’s attempts to exploit a supposed loophole regarding the transmission of television shows, broadcasters have sued the startup to keep its service from launching on March 14. Experts say the broadcasters may have a legitimate case. If so, the litigation could jeopardize Aereo’s plan to offer its subscribers live streaming of network broadcasts to Web-connected devices such as tablets, smartphones, laptops, and televisions.

Aereo is not talking much these days, a stark change from the fanfare at the February press event held at the headquarters of Internet company IAC in New York, when the new platform was introduced. That same day, Aereo also announced it raised $20.5 million in a Series A funding round led by IAC.

Lawsuits were filed early this month in the U.S. District Court for the Southern District of New York on behalf of two groups of television broadcasters that want Aereo stopped before it begins streaming content to its subscribers. The group of plaintiffs, which includes Fox Television Stations, Univision, and local broadcasters WNET and WPIX, issued a statement that they do not want to stifle new technology for video distribution. However, these plaintiffs claim Aereo’s stream would violate their copyrights and redistribute their shows without compensation. The plaintiffs said Aereo’s arguments were based on a fundamental misunderstanding of copyright law. The complaint calls Aereo “an unauthorized Internet delivery service that is receiving, converting, and retransmitting broadcast signals to its subscribers for a fee.”

The lawsuit seeks compensation for damages and calls for a permanent injunction against Aereo to cease Web retransmission of programming. Thus far Aereo has only commented via a blog post: “Aereo does not believe that the broadcasters’ position has any merit and it very much looks forward to a full and fair airing of the issues.”

Media and television attorney Craig Delsack in New York believes Aereo’s service does fall under federal regulations for retransmission consent, because the platform creates a closed system for distributing signals. “Unless each antenna has a unique address that only goes to that one home,” Delsack says, “it’s a little dicey.”

Aereo claims its service would transmit network shows to private viewers, which would not violate federal copyright and broadcast regulations. The plaintiffs argue the retransmissions would go to a public audience of subscribers. Aereo uses tiny antennae mounted together inside box-shaped units installed around the city. According to Aereo’s portrayal of the service, each user would tap into one antenna. More thorough details about the technology have yet to be revealed, however.

Aereo’s platform lets users view broadcast network programs on Web-connected TVs and mobile devices for a $12 per month subscription. The service also offers a Web-based DVR for recording shows for personal viewing. The initial plan is to offer the service first in the New York area where Aereo’s antennae have been installed around the city. The company’s blog states consumers have the right to use Aereo’s remote antennae to privately view broadcast shows.

From a certain perspective, the litigation is not all that surprising. Broadcasters are known to play hardball with cable operators by allowing channels to go dark on cable services if financial terms are not agreed upon. As innovators continue to create new platforms to broadcast television shows, Delsack says, questions will also likely arise about compensation. “We’ve seen broadcasters pull content from Hulu because they’re not getting the revenue they wanted from it,” he says. So no one should be shocked, he says, if the tech world sees more legal battles such as the one Aereo faces now.

João-Pierre S. Ruth is the editor of Xconomy New York. He can be reached at jpruth@xconomy.com and followed on Twitter @jpruth. Follow @jpruth

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