Bloomberg News

Diller-Backed Aereo Can Keep Operating While Networks Sue

July 11, 2012

Aereo Inc., the online television service backed by Barry Diller, won’t be shut down while U.S. television networks pursue a copyright lawsuit against the company, a federal judge ruled.

U.S. District Judge Alison Nathan in Manhattan today refused to grant a preliminary injunction that would have put New York-based Aereo out of business while the litigation proceeds.

“Plaintiffs have not shown a likelihood of success on the merits” of the case, Nathan said in her ruling. She conducted a two-day hearing in May to determine whether to issue the preliminary injunction.

Aereo subscribers register online and get access to a remote antenna that captures over-the-air TV broadcast signals and routes them to devices such as the iPhone, iPad and AppleTV. Networks including Walt Disney Co. (DIS:US)’s ABC and Comcast Corp. (CMCSA:US)’s NBC sued Aereo in March, saying it infringed copyrights and should be shut. The networks said Aereo hadn’t paid for the right to offer their programming over the Internet. Plaintiffs also include CBS Corp. (CBS:US) and News Corp. (NWSA:US)’s Fox Broadcasting.

“Today’s decision is a loss for the entire creative community,” a group of networks said in a joint statement e- mailed by Fox spokesman Scott Grogin. “The judge has denied our request for preliminary relief -- ruling that it is OK to misappropriate copyrighted material and retransmit it without compensation.”

Aereo Chief Executive Officer and founder Chet Kanojia said in a statement the ruling “shows that when you are on the right side of the law, you can stand up, fight the Goliath and win. This isn’t just a win for Aereo, it’s also a significant win for consumers who are demanding more choice and flexibility in the way they watch television.”

TV Broadcasts

“This case is not over by a long shot,” CBS said in an e- mailed statement from spokeswoman Shannon Jacobs. “We intend to immediately appeal this decision to the Second Circuit and seek expedited consideration. We also intend to seek damages and a permanent injunction before this court.”

NBC said in a statement that the court “clearly determined” that Aereo is harming broacasters and content creators.

“We intend to appeal in order to ensure that local and national broadcasters can continue to serve the communities across the country that rely on them for local and national news, sports and entertainment,” NBC said.

Aereo said consumers have the right to watch TV shows using individual antennas and that the service doesn’t infringe copyrights. The service began in March in New York, where subscribers get access to TV station broadcasts for $12 a month. David Hosp, a lawyer for Aereo, told the judge in closing arguments at the hearing that transmission to an Aereo customer is a private performance not, as the networks claimed, a public performance, which requires a license under copyright law.

Advertising Revenue

“The plaintiffs have failed to demonstrate they are likely to succeed in establishing that Aereo’s system results in a public performance,” Nathan said in her opinion.

The networks said the advertising revenue that sustains their business could decline if a service like Aereo isn’t stopped. If viewers gave up their regular TV service for Aereo, they would no longer be counted in the ratings that determine what networks charge for airing commercials, the networks argued.

Nathan said in her opinion that the networks hadn’t proved they would be harmed by Aereo “during the pendency of this litigation.”.

Aereo received a boost before its service began operating, when Diller’s digital media company IAC/InterActive Corp. (IACI:US) led a $20.5 million round of financing for the startup. Diller, who is on Aereo’s board, once ran Fox Broadcasting.

“I’m happy the judge denied the injunction, and now we can really begin telling television consumers they have an alternative,” Diller said in an e-mailed statement.

Ivi Inc., another service that streams TV broadcasts to subscribers online, was shut down last year by a federal judge in New York. Oral arguments in its appeal to overturn the injunction were heard in May.

The cases are American Broadcasting Cos. v. Aereo, 12-1540, and WNET v. Aereo, 12-1543, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net; Patricia Hurtado in New York at pathurtado@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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