Video streaming service Aereo loses at Supreme Court

The U.S. Supreme Court has ruled that Web-based video streaming service Aereo, which rebroadcasts over-the-air television through antenna farms, violates the copyrights of TV networks.

The court, in a ruling targeted specifically at the company's technology, decided that Aereo infringes the performance right section of copyright law by selling subscribers a service that allows them to watch TV programs over the Internet at "about the same time" as the programs are broadcast over the air, wrote Justice Stephen Breyer for the 6-3 majority.

The 2-year-old Aereo -- which was sued for copyright infringement by ABC, CBS and other broadcast TV networks -- argued that it rents each subscriber an antenna and a DVR service. Subscribers individually choose what programs to watch, and unlike cable and satellite TV services, which pay royalties to some networks, Aereo does not give thousands of people access to the same TV show at the same time, Aereo had argued.

The Supreme Court reversed an April 2013 ruling from the U.S. Court of Appeals for the Second Circuit saying Aereo service was legal because the company makes use of several legal technologies, including mini TV antennas, DVRs and a Slingbox-like streaming service.

But the U.S. Congress in 1976 amended the Copyright Act, negating an earlier Supreme Court ruling, that exempted community antenna television (CATV) systems, a cable-like precursor to Aereo, from copyright infringement claims, Breyer wrote.

Under the definitions of the amended Copyright Act, Aereo performs or transmits TV content that is protected by copyright, he said.

"This history makes clear that Aereo is not simply an equipment provider," Breyer wrote. "Aereo sells a service that allows subscribers to watch television programs, many of which are copyrighted, almost as they are being broadcast."

An argument from Aereo and from dissenting justices, including Justice Antonin Scalia, that the company's service doesn't provide a continuous video stream "makes too much out of too little," Breyer wrote. "Given Aereo's overwhelming likeness to the cable companies targeted by the 1976 amendments, this sole technological difference between Aereo and traditional cable companies does not make a critical difference here."

Scalia, in his dissent, compared Aereo's service to businesses offering photocopying services. "A copy shop rents out photocopiers on a per-use basis," he wrote. "One customer might copy his 10-year-old's drawings -- a perfectly lawful thing to do -- while another might duplicate a famous artist's copyrighted photographs ... Either way, the customer chooses the content and activates the copying function; the photocopier does nothing except in response to the customer's commands."

Digital rights group Public Knowledge questioned the ruling. "It is very unfortunate for consumers that the Supreme Court has ruled against Aereo," said Bartees Cox, a spokesman for the group."Aereo is a true innovator in the TV industry and provides high quality and affordable programming for its customers. We look forward to seeing what Aereo will do in response to the Supreme Court's ruling."

The decision may have an "initial effect on technological development," added Ross Dannenberg, an intellectual property lawyer at Banner & Witcoff's Washington, D.C., office. "In the back of their minds, [tech entrepreneurs] will be thinking, 'remember what happened to Aereo? They spent all that money and then were shut down'."

But the Supreme Court went "out of its way in an attempt to prevent the decision from stifling innovation" by focusing on Aereo's specific technology, he added by email.

Although Aereo supporters had raised concerns about the impact of a decision against the company on cloud service providers, the court said those types of businesses should be unaffected, Dannenberg said.

Andrew Goldstein, a partner at Freeborn & Peters in Chicago, agreed that the decision was limited.

"The Supreme Court majority opinion emphasized that they are not ruling on future technologies that are not before them at the moment; and that given the limited nature of the holding the court does not believe this decision will discourage the emergence of use of different kinds of technologies," he said by email.

Remote DVR services may be affected, but other technologies aren't covered by the ruling, he said.

"I do not believe that this decision makes it tougher in general to launch new innovative services," he said. "If anything, this case is a lesson to new technology developers that if you build your business on a loophole in the law, similar to Aereo, your business may be akin to a house of cards."

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's email address is grant_gross@idg.com.